Prime London rents have continued to fall slowly during the past year in the face of increased uncertainty, recording an eighth consecutive quarter of marginal falls. Rents were softening ahead of the EU referendum, but the Brexit vote has altered the shape of the market. Here we look at five micro-trends in the residential rental market that the broad averages conceal.

The lifestyle upsizer commits to renting

Renting, rather than buying, is becoming an increasingly popular choice, whether for convenience or financial reasons. As a result, longer tenancy lengths are more common thanks to the stability they provide. Our data highlights this growth across prime London, where the average length of tenancy increased from 13.1 months in 2012 to 17.7 months in 2017.

One particular group behind this increase is tenants at the top end of the market who are showing renewed commitment to renting. In particular, there has been a growth in the number of 35 to 45-year-old long-term renters looking to upsize.

For those looking to rent for a longer period than maybe originally planned, the quality of the space they rent is of great importance and they are willing to pay a premium for these properties.

Changing demands of super prime

During the past 12 months, there has been a rise in super prime rental properties (£4k+ per week) being brought to market, mainly from developers providing new luxury homes and individuals who have chosen to let their properties while waiting to see how the sales market moves during the next few years.

The supply of available properties has coincided with a rising number of high-net-worth individuals now choosing to rent, rather than buy, a London home. Only needing a London base for a few years and deterred from buying given the 2014 stamp duty changes, the cost of short-term renting can make more financial sense than the purchasing costs.

In recent years, we have also seen a rise in the number of global entrepreneurs who are living more transient lifestyles, moving from country to country, year by year. These wealthy tenants prefer prime central London locations, and properties with the type of decor and amenities that enable them to move straight in.

Corporate budgets have increased

Against a backdrop of falling rents, corporate budgets have risen 13% year on year according to Savills Corporate Services, largely driven by higher financial-sector budgets. In the first half of 2017, these were 59% higher than the same period last year, adding more than £2,000 to the average monthly budget.

This time last year, companies were relocating fewer senior executives to London, focusing more on mid-ranking staff moving alone or as a couple. Now, banks and financial institutions are relocating higher-level staff to steer decision making through the Brexit process.

The diplomatic community is experiencing a similar trend, which means in some locations the market is seeing greater demand for family housing close to the best schools.

Best in class beats location

As more and more tenants choose to rent (up from 15% in 2013 to 20% in 2017 according to our data) the decision of what and where to rent is becoming more important. It is now common for tenants to focus their search on one area, but eventually decide to live somewhere entirely different.

Often, the standard of property has become more important than the location. Tenants now prefer high-spec properties in immaculate condition over the prestige of a well-known address. New build properties are setting the bar, with the quality of place an important factor, favouring locations such as Marylebone and Westminster over more traditional core central London areas.

This means that investors entering the market need to consider what they buy and where. Existing owners, particularly the great London estates, should continue their programme of stock upgrades and public-realm improvements to retain a rental premium and prevent voids.

The rise of try before you buy

The decision to move out of London can be a daunting one for those unsure of whether to make the leap. So, for many, renting before committing to making a purchase is a sensible step to ensure the new area is suitable. According to our dealbooks, tenants moving from London and renting in the commuter zone accounted for 21% of the market between 2015 and 2017.

These relocators have a clear preference for properties in a city or town with good schools, easy access to amenities and transport. This is not a new tendency and, by contrast, demand continues to be weaker for both village and rural locations.

Looking forward, we expect this trend to continue, particularly as we see more meaningful increases in the number of people following traditional relocation routes out of London.